Geography/Y4/Industries
__TOC__ =Industries= Overview *Definition and classification of industry and industrialization *Explanation and evaluation of industrial shift *Globalization, Global Industrial Shift **Characteristics / Processes / Trend of Transference **Reasons - Competitive Advantages, Space Shrinking Technology **Impact on world economy - Uneven global distribution of Less Economically Developed Countries (LEDCs), More Economically Developed Countries (MEDCs) and Newly Industrialized Economies (NIEs) *Transnational Corporations (TNCs) **Characteristics of Transnational Corporations (TNCs) **Linkages with host Country – Impacts (Pros and Cons) Types of Industries An industry refers to any form of economic activity. There are 4 main types of industry: Primary, Secondary, Tertiary and Quaternary. Factors affecting Location of Industries There are several factors that will affect the cost of production which will influence the location where industries are. *Physical Factors: Land, Raw Materials, Energy. *Human Factors: Capital, Labour, Market, Government, Transport and Technology. Physical Factors Land *Land refers to the space where people carry out their activities. For instance, the secondary industry requires land to build factors whereas the tertiary industry requires land to offices and retail spaces. *Due to competing land uses, land in the city is more expensive. Cheaper land at the outskirts of the city will attract companies that require large tracts of land for their industries. *Industries tend to set up their operations on level land as it is easier to clear it from existing features like forest vegetation. *Industries that require large amounts of land would locate far away from the city where land is less expensive and congested. For instance, the Chengdu airframe plant in China is located about 11km away from the city of Chengdu. *However, some industries still locate their industries near the city as: **Manufacture of perishable products such as food and newspapers. **Trends can be monitored – important for the fashion industry **Small – scale operations producing high value goods. **Industrial Inertia – due to past locating decision. Occurs when an industry does not leave the original location despite the factors that initially made the location advantageous are no longer present. **The newly electronics industry may require less space than larger traditional industries as they can located in flatted factories (multi–storey buildings). They are suitable for light industries and are useful in land–scarce Singapore as they efficiently utilize space. Raw Materials *Raw Materials are naturally occurring or partially processed physical substances that are used as inputs for production or manufacturing. *Some primary industries are located where raw materials are found as these industries are directly involved in the extraction of natural resource *The location of secondary industries depend on the nature, availability and cost incurred in transporting raw materials. **Industries located close to raw materials if they are bulkier and heavier than their finished products, also known as weight losing industries. This helps them save on transportation costs as it is relatively cheaper to transport the finished products to their respective markets than to transport raw materials to their processing plants. **Industries that use perishable raw materials are also more likely to locate close to them and their specific markets. Examples of these industries are food processing industries like sugar mills and meat packing plants. By locating near them, the industries can ensure freshness of raw materials and reduce transportation costs. (E.g. Gardenia located near S'pore) **Industries that need to use many different raw materials will locate where the major raw materials are brought together at the lowest costs. (E.g. Motor vehicles/Electronics). *Water is also a significant raw material used in many manufacturing processes like cooling and washing, thus a reliable supply of clean water is important as a factor in deciding location. Energy *Energy refers to the power required to run machines. It is needed to process raw materials and produce goods. *Industries that require a large supply of energy are usually located near energy sources such as coal/oil to save transportation costs. *A constant supply of energy is also an important factor as a disruption in energy supply would delay the production process, hence they will locate in places where there is a steady flow of energy. *Currently, most energy for industries is provided by electricity transmission grids or by gas distributed through pipelines. The flexibility in the delivery of energy means fuel sources have a weaker influence on location of industries than in the past. *Industrial Inertia may occur for certain industries as it may be costly to transport the workers and heavy machinery to lower costs sites. Human Factors Capital *Capital refers to the financial resources needed to set up and run a business or industry. It is used in many areas such as constructing/renting buildings, purchasing raw materials and machinery and transporting goods. *The availability of loans from banks and financial institutions may also attract companies to locate their operations at a particular place. *Capital intensive industries require high levels of investment in machinery and other equipment but a small amount of labour. *Sufficient capital allows an industry to have a freer choice of location. For e.g. Silicon Valley in California supports a cluster of high tech industries dealing with electronics. Its development is made possible by location of nearby research facilities and availability of capital. Labour *Labour is the group of workers employed to run operations and are paid wages. *Different industries would be attracted to regions where there is a large supply of the type of labour they require at a low cost to maximize profits. *Labour – Intensive Industries would choose to locate in areas where labour is low in cost and is readily available. *The rapid growth of textile and clothing factories in the LDCs cause the shift of certain companies’ production facilities to locations with lower labour costs. **For e.g. Sewon, a South Korea footwear manufacturer relocated its manufacturing activities to China in 1989 to reduce labour cost. Quaternary Industries like electronics and aeronautics that require specialized and highly – skilled labour may choose to locate where such labour is available. **For e.g. Silicon Valley in California became the centre of high tech industries after the first factory was set up in 1958; its development was determined by the presence of an educated and specialized labour force. Market *The market refers to a place of transaction and the demand for a certain good or service. They are areas where there are people with purchasing power. *Secondary Industries may choose to locate near their consumer markets for reasons such as perishable products. *Other factors may set up near their markets if their finished products are heavier than the initial raw materials. These industries such as soft drinks, cars and furniture are known as weight gaining industries. A market oriented location for these industries will help reduce transportation costs to the market. *These locations are also beneficial for perishable goods such as bread, milk and newspapers. *Fashion clothing design would locate close to markets as it is highly dependent on market demand and customer’s preferences. *The advancement of modern technology has reduced the need for some industries like the garment manufacturing industry to be located close to the market as designs can be electronically transferred, and transportation of goods are faster and more efficient. *Industrial Concentration is a phenomenon whereby industries which produce output used by other industries are located near them. Printing and cutting factories locate close to the garment manufacturing industry. This allows them to produce in quantity at a cheaper rate per unit. Government *For e.g. in the Ruhr region of Germany, 300, 000 jobs in the Steel Industry were lost between 1960 and 2000. Using money from national governments, EU and investments from foreign companies, new industries are established focusing on electronics and telecommmunications. A motor vehicle factory producing Opel cars was set up there after the coal mines closed. **The Ruhr Planning Authority and the German government set up Technology Transfer Centres to improve links between companies and research insitutions to help improve products / production methods for industries. **In addition, Ruhr is within 2hr travelling time to most of Europe’s major cities, providing a large market for Ruhr’s goods. **In addition, the Ruhr Planning Authority has been successful in improving the region’s environmental quality by reducing pollution from factories and allocating more recreation areas, thus encouraging the population to remain and attract more skilled labour from other parts of the country. *The Government is made up of a group of people who looks into the way a country is run. *A government may provide financial incentives such as tax exemptions, tariffs or bank loans with low interest rates to attract companies to set up their operations in that country. **For e.g. in the 1970s and 1980s, the Singapore Government offered many incentive packages to encourage foreign companies to set up their businesses here, thus attracting many Japanese electronics companies into Singapore. **E.g. 2 Dubai in the Middle East offer tax holidays (enterprise pay low/no taxes on profits on imported components) of up to 50 years for new enterprises. *Governments also have the authority to restrict or limit certain types of industries. For instance, they may pass laws to prevent pollution and environment degradation. *The Government manages an economy and thus provide basic facilities such as roads, railways, ports, electricity and water for industries. **For e.g., a dedicated, reliable electricity supply built by the Karnataka State Government of India has been successfully developed the electronics industry in Bangalore. *Governments should also promote the presence of an educated and skilled workforce which is essential for the development of modern industries like computers and telecommunications. *Governments can direct or encourage the location of industries in areas where there would be an advantage for the economic and social development for the region. **For e.g. Petrochemical works and energy generation plants are usually located away from population centres as they release harmful gases. *Governments can also impose planning controls where industries can or cannot locate. Transport *Transport refers to the movement of people and goods from one place to another through the use of vehicles. *An efficient transport system is important especially for industries which cannot have their factories near raw materials. *With a good transport system, less money is spent for transporting goods, thus these places would attract more industries. *With advancement in transport systems, goods can be delivered from one place to another even more quickly and easily. *An efficient road network is also important as problems such as traffic jams may cause unnecessary delays, increasing transport and production costs. *Bulky, non – perishable raw materials like coal and iron ore (hematite) are cheaper to transport by ship or rail, thus factory processing these raw materials are located near ports or railways. *Advancement in Transportation Technology has also allowed goods to be transported over longer distance, which lead to industry transference. **For e.g. Japan’s motor vehicle industry manufactures its components in LDCs within SEA, where production costs are significantly lower. *Locations near the junctions of roads and railways attract industries like motor vehicles and electronic goods whereby there are numerous components needed for the finished products; the high number of transportation facilities also provides distribution access to markets. Technology *Technology refers to the knowledge, skills and tools that people use to meet their needs. *Advances in technology have enabled industries to overcome numerous physical constraints such as the supply of energy. *Technology has allowed many industries to become footloose (they are no longer restricted in their location by considerations about labour, transportation links, supply of raw materials or energy) *Technology has also contributed to the development of the electronics industry in SG, Malaysia, South Korea *Availability of advanced technology is important for quaternary industries that often require a quick transmission of information. They will choose places where cables, mass communications media and Internet access is readily available. *Due to better machinery for manufacturing processes, industries can employ fewer people and produce greater output than before as machines can help do automated processes. Thus industries do not need to be located in places where there are lots of labour. *It has also enabled industries to produce high quality goods at a lower cost per unit, making individual manufacturing enterprises more competitive. *Technology has changed the nature of transport. Raw materials, semi – finished and finished goods can be transported faster through containersation, reducing the costs for transport. This allows raw material based industries to have a wider choice of locations. Trend of Transference Definition Transference is the movement of industrial activity from one location to another. It has resulted in a major shift in the type of manufacturing within/between countries as well as the type and scale of manufacturing activities. Characteristics *Since the 1960s, there have been significant changes in manufacturing activities. **Overall increase in manufacturing activities. **Significant decline in some manufacturing activities in DCs. **Significant increase in manufacturing activities in the LDCs. **Outsourcing of component manufacturing for the final product. **Restructuring of manufacturing activities in existing manufacturing region of the DCs. **Growing trend of international movement of raw materials, technology and labour due to improvements in technology and transportation, also spurred growth of TNCs. *Over the years, there have been a general trend of transference of these manufacturing activities from the DCs to LDCs. Reasons *Competitive advantage *Outsourcing *Space shrinking technology. Competitive Advantage *Refers to the advantage one location have over another for a good or the provision of a service. *These advantages can be in the form of lower costs of labour, energy, land, raw materials and taxes which will make a significant difference in the final cost of the product. *There are advantages for seeking low labour costs. For instance, in the 1980s Nike manufactured most of its footwear products in South Korea; as wages rose Nike moved its production from South Korea to Indonesia and China where wages are only about 5% compared to at South Korea. *Most countries tend to locate some of their manufacturing factories in areas with lower labour costs such as the LDCs. Various incentives by governments have also helped the transference. **For e.g. China’s Special Economic Zones (SEZ) along at the Southeast coast which offer a variety of tax incentives including reduced tariffs and business taxes. **Foreign TNCs like Foxconn in Shenzhen had brought considerable skills and investment capital into the zones. **Therefore, the incentives offered enable companies setting up in these zones to have a competitive advantage over companies outside the zones. Outsourcing *Involves the production of components or finished goods in areas of low labour costs. *Outsourcing bring about lower costs of assemblage of raw materials, lower taxes and better efficiency. *Large firms place orders with smaller companies to produce particular goods at a set price and quality which help to save costs. *Outsourcing is part of industry transference but leaves the parent company functioning at the original location. The parent company may go into R&D instead of manufacturing. *This arrangement has allowed TNCs to gain competitive advantage in producing components and finished goods at lower costs, and also benefit the manufacturing countries in terms of employment and technology transferred. **For e.g. the outsourcing of machine parts for the USA’s aerospace industry involves manufacturing in Mexico, where labour costs are lower. *There are several impacts for both DCs and LDCs: **It reduces manufacturing activities in high cost producing regions such as Europe and North America. **It increases manufacturing activities in the LDCs, especially in SEZs. **It assists in transfer of technology from the DCs to the LDCs. **It increases the level of skills for some workers in the LDCs. Space shrinking technology *Refers to transportation and communication technology. *For instance, containerization (use of containers) has helped to increase the speed and efficiency of moving goods. *This has enabled ideas and information to be communicated over distances at a more rapid rate, and allow companies to outsource more efficiently. **For e.g. Motor vehicle components made in China/Indonesia can be shipped to assembly lines in Japan/USA at lower costs. *In addition, SST has also enabled manufacturing activities to be more widely distributed throughout the world, increasing possibilities of profitable production in alternative regions. *Transportation: Commercial Jet Aircraft and Container ships carry people and goods faster to their destinations and thus increasing efficiency of transport. *Space shrinking technology makes it possible for production stages and component manufacturing to be separate from each other, which assisted the globalisation of many industries like the passenger car industry. *Communications: Information highways of electronic components also contribute to the trend of transference. These highways include: **Stationary satellites (linking everyone through Internet and phone services) **Optic fibre cables (high speed transmission of information at excellent resolution) **Digital transmission **Mass media like newspapers and TV. *Therefore, communications via the information highway means all aspects of the company’s operations can be monitored and production costs can remain competitive. 'Advantages and Disadvantages' Industries